Monday, September 11, 2023

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Navigating the Rise of Toxic Mould Exclusions in Professional Indemnity Insurance

For professionals such as architects, engineers, and construction contractors, the importance of having Professional Indemnity (PI) insurance cannot be overstated. This cover shields construction professionals from claims related to professional negligence, errors, or omissions. However, in recent years, numerous insurers have adopted blanket toxic mould exclusions, resulting in the removal of coverage for claims directly or indirectly associated with the presence of toxic mould. This article unpacks the reasons behind this trend, the unintended consequences of these exclusions, and how a specialist broker can help you find adequate cover.

What is toxic mould?

Toxic mould is a pervasive and potentially hazardous issue within the construction industry. Unlike exclusions for uncommon risks such as Asbestos or nuclear radiation, mould is far more prevalent, and it can affect almost any construction professional. Moisture infiltration from inadequate waterproofing, plumbing leaks, or even improper ventilation, can create the ideal conditions for mould growth. The consequences of mould infestation extend beyond structural damage, including personal injury arising out of exposure to toxic mould.

Why are toxic mould exclusions on the rise?

The growing prevalence and severity of mould-related issues in construction projects is a key reason for these exclusions in PI insurance. Unlike exclusions for rare risks that affect a limited number of professionals, mould can arise in any project, regardless of its scale or complexity.

As toxic mould is caused by excessive moisture, the presence of mould in a building often indicates a failure in its waterproofing. Waterproofing issues can be caused by poor workmanship, substandard materials, and inadequate testing. Such failures lead to costly rectification expenses, litigation, reputational damage, and large consequential loss claims for construction professionals, significantly increasing overall claims costs for insurers. The broad application of these exclusions enables insurers to address the larger issue of waterproofing claims.

Why does comprehensive coverage matter?

The cost of remediation, legal proceedings, and potential damages can be substantial leaving construction professionals exposed to claims. Construction professionals should be mindful of the contractual obligation to hold adequate insurance, and policies that exclude coverage for toxic mould can impact these commercial obligations.

Given the prevalence of such risks within the industry, we urge construction professionals to seek out comprehensive PI policies that cover mould-related claims. While some insurers apply exclusions, many providers offer coverage for mould-related issues. By carefully reviewing insurance wordings and seeking guidance from a broker that specialises in construction PI, practitioners can find policies that help to protect them against the financial consequences of mould-related claims.

Next steps

To find out how our specialists can assist your business, feel free to reach out at any time.


Luke Vumbaca

Client Manager – Team Lead

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